Countdown to a Cashless Society
6-10-2016

It seems like every day there’s a new technology that promises to eliminate cash for good. Venmo makes it a snap to split the check at a restaurant. In the UK, you can use the Pennies app to donate your change to charity. In 2012 (when the Federal Reserve conducted its last payments study), 42% of the average American consumer’s transactions were made using a debit or credit card, while 40% of transactions were made with cash. It was the first time in history that card transactions outnumbered cash by volume – in terms of value, cards have been leading the pack for a while. In 2013, MasterCard Advisors estimated that 45% of US consumer transactions were made with non-cash methods (encompassing credit and debit cards, checks, wire transfers, and direct bank debits). So what does this mean for cash?
Any way you slice it, 40% is still a hefty chunk of our spending — two out of every five U.S. consumer transactions are made with cash. Globally, cash transactions make up about 85% of total consumer spending, although the advent of mobile payment apps like M-Pesa (and other apps which don’t need to be connected to a bank account) are making fast inroads. The U.S. is doing better than average, but we’re not even in the top five. Singapore, where 61% of consumer transactions are conducted using non-cash methods, is currently the world’s most cashless economy. Next on the list is the Netherlands (60%), France and Sweden (59%), Canada (57%), Belgium (56%), the UK (52%), and then it’s the United States in eighth place (at 45% as estimated by MasterCard). The good news is that we’re on the tipping point of going cashless — we have the right combination of widespread access to financial services, a growing cultural preference for non-cash payments, near-ubiquitous merchant acceptance and healthy competition for new ways to pay, and a solid infrastructure for electronic payments.
About one in ten Americans doesn’t carry any cash with them on a daily basis, according to a 2014 Bankrate survey. Four in ten carry less than $20 (you might find yourself in that camp). And the vast majority (eight in ten) carries less than $100 in cash on a daily basis. These findings support the idea that, when consumers do use cash, it’s primarily for small-dollar amounts. The average value of a U.S. consumer’s cash transaction is $21, and two-thirds of transactions worth less than $10 are made with cash. As it becomes more convenient to use new technologies like mobile wallets for these low-dollar transactions, we will likely see consumer behavior shift even further away from cash. The future is cashless — are you ready?
About ETA
The Electronic Transactions Association (ETA) is the global trade association representing more than 500 payments and technology companies. ETA members make commerce possible by processing more than $6 trillion in purchases in the US and deploying payments innovations to merchants and consumers. Learn more: www.electran.org.
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